Cerner Middle East Limited v. iCapital, LLC

• Decision Date: 23 September 2019
• Docket Number: No. 17-35514,17-35514
• Citation: 939 F.3d 1016
• Parties: CERNER MIDDLE EAST LIMITED, a Cayman Islands Exempted Company, Plaintiff-Appellant, v. ICAPITAL, LLC, a U.A.E. Limited Liability Company; Ahmed Saeed Mahoud Al-Badi Al-Dahari, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

939 F.3d 1016

CERNER MIDDLE EAST LIMITED, a Cayman Islands Exempted Company, Plaintiff-Appellant,

v.ICAPITAL, LLC, a U.A.E. Limited Liability Company; Ahmed Saeed Mahoud Al-Badi Al-Dahari, Defendants-Appellees.

No. 17-35514

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 12, 2018 Portland, Oregon

Filed September 23, 2019

Warren E. Gluck (argued) and Sean C. Sheely, Holland & Knight LLP, New York, New York; David J. Elkanich and Garrett S. Garfield, Holland & Knight LLP, Portland, Oregon; for Plaintiff-Appellant.

Gary I. Grenley (argued), Paul H. Trinchero, and Eryn Karpinski Hoerster, Garvey Schubert Barer, Portland, Oregon, for Defendants-Appellees.

Before: Richard R. Clifton and Consuelo M. Callahan, Circuit Judges, and Roger T. Benitez,^* District Judge.

CLIFTON, Circuit Judge:

This appeal asks us to determine whether an arbitration award later confirmed by a court in France is enforceable against property in Oregon owned by a named respondent in that arbitration who contends that the arbitration panel did not have jurisdiction over him.

Plaintiff-Appellant Cerner Middle East Limited filed this action in Oregon state court to enforce an arbitration award against property in that state owned by Defendants-Appellees Ahmed Saeed Mohammed Al Badi Al Dhaheri¹ and iCapital, LLC. Quasi in rem jurisdiction exists when a plaintiff seeks to enforce a judgment against a defendant’s in-state property. Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co. , 284 F.3d 1114, 1127 (9th Cir. 2002). Defendants removed the case to federal district court, where they argued that Cerner could not enforce the arbitration award against Oregon property owned by Dhaheri until a court confirmed the arbitration panel’s conclusion that Dhaheri was properly within the panel’s jurisdiction. They therefore maintained that the award could not support the district court’s exercise of quasi in rem jurisdiction. This district court agreed and dismissed this action.

While this appeal was pending, the Court of Appeal of Paris, a court with jurisdiction over Dhaheri, confirmed the arbitration panel’s conclusion that Dhaheri was subject to the panel’s jurisdiction. We hold that the French court’s decision is entitled to recognition under the principles of international comity. As a result, the elements of quasi in rem jurisdiction are present. Cerner possesses a valid judgment against Dhaheri, who owns property in Oregon. We therefore reverse the district court’s order dismissing this case for lack of personal jurisdiction and remand for further proceedings.

I. Background

This action is one of several disputes between Cerner, on one side, and Dhaheri and entities he controls on the other.²

Plaintiff Cerner Middle East Limited (identified in this opinion as "Cerner") is a Cayman Islands corporation with its principal place of business in Kansas City, Missouri. It is a subsidiary of Cerner Corporation, a medical services technology company based in Kansas City, whose revenue in 2018 was excess of $5 billion and whose stock is listed on the NASDAQ exchange.

Dhaheri, a businessman with substantial holdings, is a citizen and domiciliary of the United Arab Emirates ("UAE"). iCapital, LLC is a UAE limited liability corporation with its principal place of business in Abu Dhabi, UAE. Cerner alleges that Dhaheri owns and controls iCapital, LLC. iCapital’s predecessor was iCapital S/E, a UAE sole proprietorship through which Dhaheri did business.

In 2008, the United Arab Emirates Ministry of Health awarded iCapital S/E a contract to develop medical information software for use in the UAE. iCapital S/E and Cerner signed a contract (the "Cerner Business Agreement" or "CBA") under which Cerner would provide hardware, software, and services for the UAE project. The CBA required the parties to submit any disputes to binding arbitration under the rules of the International Chamber of Commerce ("ICC"), specified that the seat of arbitration shall be in Paris, France, and stated that the language of an arbitration shall be English. The contract also contained a choice of law clause that stated that it "shall be governed by, construed, interpreted and enforced in accordance with the laws of the State of Missouri[.]"

Cerner filed a request for arbitration with the ICC in September 2012. It contended that iCapital S/E had failed to make payments due under the CBA. It also complained that iCapital S/E, a sole proprietorship, had been reorganized into iCapital, LLC, a limited liability company, without Cerner’s consent, which Cerner alleged was contrary to the terms of the CBA.

That dispute appeared to have been settled three months later. The settlement divided iCapital’s liability into two parts: the amount that iCapital owed Cerner for the work already completed under the CBA (the "Overdue Amount"), and the amount that iCapital would owe Cerner for the future work contemplated by the CBA (the "Future Payments"). The liability of iCapital for the Overdue Amount was addressed in a Settlement and Payment Agreement ("Settlement Agreement") signed by Cerner and iCapital, LLC. It set the amount owed to Cerner for past performance and waived claims for past acts or omissions by the other party and its affiliates and their directors, officers, employees, agents, and representatives. The liability for the Future Payments was addressed in Amendment No. 5 to the CBA, also signed by Cerner and iCapital, LLC. That Amendment "re-schedule[d] the Future Payments owed to Cerner" under the original CBA.

Amendment No. 5 also revised the language of the original CBA’s arbitration clause, retaining the elements described above that required the parties to submit any disputes to binding arbitration under the rules of the ICC to be conducted in English in Paris. The Settlement Agreement adopted the arbitration clause set forth in Amendment No. 5 to the CBA, and the choice of law clause set forth in the original CBA.³

Unfortunately, the settlement did not bring a lasting peace. In August 2013, Cerner initiated a second request for arbitration against iCapital, LLC and Dhaheri with the ICC, contending, among other things, that iCapital had failed to make payments called for by the Settlement Agreement. iCapital responded to the notification by objecting to the arbitration. Dhaheri declined to respond to correspondence from the arbitration administrator. The International Court of Arbitration of the ICC concluded that the arbitration should proceed against both respondents and appointed a three-member arbitral tribunal ("Tribunal").

The Tribunal issued its award in July 2015. It determined that it had jurisdiction over both iCapital, LLC and Dhaheri personally. It held that iCapital, LLC had agreed to submit to arbitration by signing the Settlement Agreement and Amendment No. 5 to the CBA. The Tribunal also concluded that it could exercise jurisdiction over Dhaheri on two separate grounds. First, Dhaheri was personally liable, as a sole proprietor, for the obligations of iCapital S/E under the original CBA and had consented to be bound by the arbitration clause in the original CBA. The Tribunal concluded that he had not been released from his obligations as the "owner" of iCapital S/E, including the agreement to arbitrate disputes that arose up to the execution of the Settlement Agreement, at which point Cerner agreed to recognize the restructuring of iCapital S/E into iCapital, LLC. Second, Dhaheri was the alter ego of iCapital, which had signed a binding arbitration agreement. As to the merits of Cerner’s claim, the Tribunal held that both iCapital, LLC and Dhaheri were liable to Cerner for more than $62 million in damages.

After the Tribunal ruled in its favor, Cerner filed a series of actions in the United States that sought to enforce either the Arbitration Award or the Guarantees. This is one of those actions.

Cerner initiated this case by filing a verified complaint in Oregon state court seeking to attach funds in an Oregon bank account owned by Dhaheri. To establish jurisdiction, Cerner relied on a quasi in rem theory. Quasi in rem jurisdiction exists when a plaintiff seeks to collect on an existing judgment by executing on the defendant’s in-state property. Glencore Grain , 284 F.3d at 1127.

Defendants removed the case to federal court. They then filed a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). In that motion, they maintained that the district court could not rely on the quasi in rem theory because Cerner did not possess a valid judgment against Dhaheri.⁴ Specifically, they contended that the Tribunal’s award could not be enforced because the Tribunal lacked the authority to rule on the issue of whether Dhaheri was subject to arbitration. While Defendants apparently agreed that a court could confirm the Tribunal’s decision, they contended that to make that determination a court needed to have jurisdiction over Dhaheri, which the district court in Oregon did not have. The district court agreed and granted Defendants’ motion to dismiss.

This appeal followed. In the initial briefing, Defendants relied on the same arguments, that (1) the Tribunal could not independently determine whether Dhaheri had agreed to arbitrate, and (2) the district court could not confirm the Tribunal’s decision because he was "entitled to have a court of competent jurisdiction determine whether he is bound by the arbitration provision [in the SPA and CBA]."

While this appeal was pending, on October 16, 2018, the Court of Appeal of Paris (the "Paris Court") affirmed a French trial court decision that confirmed the Arbitration Award. In reaching that conclusion, the Paris Court specifically concluded that "it was rightly that the [Tribunal] declared [that it] had jurisdiction with respect to [Dhaheri]."⁵

We asked the parties to submit supplemental briefs addressing the impact of the Paris Court’s decision on this case. In their...